Tips on Saving

Since childhood, it has been engrained into our minds and lifestyles that it is important to be aware of our financial situation. Whether that meant stashing the five-dollar bill you got for allowance every week in a shoebox under your bed or setting up a bank account. It’s an important aspect of life because – to be quite frank – money runs the world.

As you get older, saving money becomes increasingly more difficult than simply throwing a few bills into a shoebox and deciding not buy that candy bar you see at the grocery store. You have to start spending money on a never-ending list of expenses – gas, rent, bills, student loans and more. Everyone wants to save and, for the most part, understands how imperative it is, but not everyone knows where to start or if they can afford to save.

We’ve compiled a series of tips to show you that saving is always possible in one way or another.

Invest in Your Future by Numbers

Have you heard of the Rule of 10? Rule of 72? The 50/20/30 budgeting guideline? Are your eyes starting to cross due to number overload yet? Don’t worry; let us break it down for you.

Rule of Minus 10

Saving money while in your twenties may seem like a faraway daydream or #lifegoal, but if you start small it’s possible. The Rule of Minus 10 says that individuals in their twenties should try to save about ten percent of their income for future retirement. At a young age, when you feel like you’re just starting out and earning a salary, it can seem like quite the investment. But think of it this way: the percentage amount you have to save increases the longer you wait. If you start in your thirties, that number increases to twenty percent and so on. So what’s the holdup?

Rule of 72

If you already have investments or are planning on making one soon, the Rule of 72 breaks down how to calculate the percentages being thrown your way and determine if it’s worth your while. It determines roughly how many years it will take for you to double your investment. How? Divide 72 by the annual rate of return on your investment and that is how many years you’re looking at until your money doubles. It’s easy while giving you a perspective on a timeline.

50/20/30 Budgeting

Taking full control of your money and applying a budget system is exponentially easier said than done. It can start as a good idea and end in an exasperated sigh as you give up. This is mostly due to there being too many avenues to take which makes categorizing a budget difficult. The 50/20/30 budget simplifies that. This budgeting technique suggests that fifty percent of your take-home pay should go towards fixed expenses including rent, utilities, gas and groceries. Twenty percent of your income should go towards building a structured financial support system via retirement funds, debt payments and other investment goals. Lastly, the remaining thirty percent should go towards fun lifestyle choices that aren’t essential such as entertainment, spending a night out or shopping. Sticking to this simple budgeting method will allocate your funds and not have you questioning where or when your money disappeared.

These rules are some of the basic guidelines to keep in mind when saving, budgeting and investing. They can help you keep a simpler grasp on the financial world that can quickly get muddled down with percentages and numbers.

Understand Your Options

The options are vast and nearly limitless when it comes to investing and saving for retirement or the future in general. Chances are high that you’ve heard of a 401(k), an Individual Retirement Account (IRA) or a Roth IRA.

Another option for investing is to invest in your childrens’ future education with the 529 Plan. It allows you to set up a fund for a beneficiary (likely a child or grandchild) for their future education expenses without annual income taxes. Nearly every state has this type of investment plan option in one way or another.

Understanding your investment options is a key component of getting the most out of your money.

Cut the Plastic

Credit card options and offers are everywhere once you hit the age of eighteen. Offers start popping up in the mail every month, retail stores continuously offer discounts if you open a card and payment plans on bigger purchases usually seem logical. It’s tempting and it’s instant. If you want to save money, however, cut the extra unnecessary plastic. A piece of plastic hiding out in your wallet serves no benefit besides acting as a security blanket for more expensive purchases. A study done in 2001 by two Massachusetts Institute of Technology professors – “Don’t Leave Home Without It” – found that people with credit cards are more likely to spend money on an item than those who only use cash. Most of the time credit cards are used when you don’t have the money on hand. What most consumers tend to overlook is that you are expected to have the money later when the bill arrives. So, cut the plastic and save by resisting the urge to spend what you don’t have.

These are just a few of the many tips on how to go about saving your money, but the key is to be educated on options before making a big decision.